Plenty of you’ve gotten been asking for updates. I apologize that I have never gotten round to it but. Been very busy. However right here is the replace.
I liquidated all of my short-term positions listed on this thread on Friday. I am holding principally money and some long-term positions in TLT in the mean time. I’ll try to replace once more after I enter a brand new place.
As proof, here’s a screenshot of my latest trades:
As a normal rule, I enter pretty conservative short-term choices positions and liquidate round 50-60% return. Most of my positions have been above 50% return on Friday, so I liquidated all the things. I took a small loss on the short-term TLT play. I assumed that the volatility and falling market can be the catalyst to spur a attainable short-term rise in bonds as traders fled to safer property, however that did not appear to be the case. TLT continues to be rising and approaching 162 so these of you continue to holding must be secure.
In abstract: My returns for the week have been round 40%, with a complete revenue round $2500. Not dangerous in any respect for a one-week play. My recommendation for noobies: Do not get grasping. When you break 50% return on choices it’s usually a good suggestion to shut, except you might be enjoying a really gambly, far OTM technique and hoping to repay huge. Thanks for studying.
Place: Places on all the things besides VXX and TLT.
After my final publish lots of people have been asking me for my positions and extra perception into the markets. I will be providing each on this publish. I am all the time comfortable to assist the noobies, as we have been all noobs as soon as. 🙂
Right now, at precisely 10 minutes earlier than market shut, I finished all the things I used to be doing, and opened up a chart on SPY. There was one thing specifically I used to be searching for… A robust Finish-Of-Day selloff.
It took a bit longer than I anticipated, however positive sufficient, proper earlier than the closing bell, SPY tanked $2 to shut.
This was the affirmation I used to be searching for that my play continues to be the proper one. The purpose is that, whereas individuals participated within the small correction-rally immediately, they weren’t snug sufficient to truly maintain their positions in a single day. Which tells you the rally immediately was by no means “actual.” This can be a sturdy sign that concern has nonetheless gripped the market, and that the sensible bulls are missing in confidence short-term. As they need to be…
Listed below are my present positions. All seven are nonetheless within the inexperienced, even after the transfer in opposition to me immediately. I may have offered yesterday for a big revenue, however I am assured sufficient that even larger positive aspects are nonetheless to return for a bearish place resembling this one. No paper fingers right here, I am holding till I hit my targets. The very brief time period choices (November expiry) have been bought immediately after that huge noon runup for a bit of additional juice. I knew that peak would not final, and can in all probability promote these tomorrow or the day after.
A few of you could balk on the “smallish” positions, since you are used to WSB model stupidity. That is nonetheless a virtually $10okay place in short-term choices, which is all the time a dangerous play. I’ve survived over a decade as a dealer as a result of I do not YOLO $100okay on a single play. That stuff is entertaining for positive, however let’s face it, it isn’t sustainable buying and selling technique.
There are many arguments for a bearish place. Covid circumstances rising, election uncertainty, stimulus failing, and so forth. Loads of others have made this case, so I will not deal with the small scale points resembling these.
What I need to offer you is a bigger, macro image. As a result of the market is just overvalued, interval. The market has turn into divorced from the general financial system. I perceive tech, and why they’ve a bullish case for progress within the face of Covid lockdowns… My level right here is that you just want some REAL WORLD measures to tie “future earnings” all the way down to actuality, to stop irrational euphoria from taking on your thoughts.
The metric I’ll current right here will not be new by any stretch. It is not distinctive or unique. However it’s undeniably helpful, and carries sturdy weight, whether or not fashionable merchants want to shun it and its originator or not. I am speaking concerning the Buffet Indicator.
For these of you new to this idea, it’s merely the full inventory market worth divided by GDP. The purpose is to check market valuations with some exhausting, trailing, real-world metric, on this case GDP. When market valuations uncouple strongly from precise market situations, it’s a sturdy sign of irrational inventory valuations. And that presents alternative for these paying consideration.
Observe that this chart has already been detrended all the way down to account for traditionally rising P/E ratios, and it nonetheless exhibits a strongly overvalued market, equal to what was seen throughout the DotCom bubble. That is dangerous information, of us.
That is the REAL concern within the current market, and why consumers have gotten exhausted. Covid, instability, elections, stimulus… These are all simply catalysts to present that fairness bubble somewhat prick. Solely the dumbest of the dumb are nonetheless “shopping for the dip” below present market situations, which suggests principally clueless retail gamblers on WSB. All these perma-bulls are doing is providing liquidity to the institutional traders to assist get them out of their positions. In the long run, everyone knows who’s left holding the bag.
The loss porn posted on this sub the previous week is only a small style of what is to return. Individuals are going to get blown out of their positions exhausting. Do not be one among them. When you aren’t snug sufficient to take a brief place, at the very least go money gang. And naturally, bonds are all the time a secure guess, particularly after the most important bond brief in historical past…
Thanks for studying. I am going to try to stick round to reply any questions. Good luck on the market.